Nota bene: Today (5 July) marks the 12th anniversary of my blog!

In my previous post, we saw how one economist, Warren J. Samuels, painted a reciprocal picture of the conflict between the cedar tree owners and the apple growers in Miller et al. v. Schoene. Simply put, one of these two groups of landowners is going to harmed no matter how the case is decided. If, for example, the courts were to declare Schoene’s order under the Cedar Rust Act to be an unconstitutional taking of private property (recall that that the owners of red cedars were initially ordered by Schoene to cut down their trees without compensation), it is the apple growers who will be harmed, since their apple trees will be exposed to the risk of being infected by cedar rust. By contrast, if the courts were to affirm the legality of Schoene’s order, which is what the trial judge, the court of appeals, and a unanimous U.S. Supreme Court all did, then it is the owners of the cedar trees who will be harmed.

So, why did Samuels’s colleague and friend James Buchanan (see the infographic below) object to Samuels’s economic analysis of this case? As it happens, something rubbed Buchanan the wrong way when he studied Samuels’s analysis of the cedar rust case, so much so that Buchanan wrote a strongly-worded reply paper to Samuels’s 1971 paper. (See James M. Buchanan, Politics, property, and the law: an alternative interpretation of Miller et al. v. Schoene, Journal of Law and Economics, Vol. 15, no. 2 (1972), pp. 439-452.) What was that “something”?

Was it, for example, the tone of Samuels’s 1971 paper that offended Buchanan’s “public choice” sensibilities? In their subsequent correspondence (see Buchanan & Samuels, On some fundamental issues in political economy: an exchange of correspondence, Journal of Economic Issues, Vol. 9, No. 1 (1975), pp. 15-38), Samuels insists that he is engaging in “descriptive” or “positive” economics (as opposed to “normative” economics), while Buchanan suspects that Samuels is, in fact, smuggling in certain moral values between the lines or through the back door.

Yes, this normative versus descriptive debate does take up a large part of their exchange, but for me it’s not the whole story. Instead, what really bothered Buchanan the most was Samuels’s and the courts’ cavalier disregard of the primacy of property rights. Although Buchanan raises several subsidiary objections to the technical details of Samuels’s economic analysis (e.g. how do we know in the absence of Coasean bargaining which land use is the most highly-valued one in this case), his main objection is to the Virginia legislature’s total disregard of property rights when it first enacted the Cedar Rust Act and to the courts’ similar disregard of property rights when they adjudicated the dispute between the cedar tree owners and the apple growers in Miller et al. v. Schoene.

But that said, Buchanan’s objection begs the key question, “Why are property rights so important in the first place?” After all, one possible reading of the “Coase theorem” in economics and in law is a Panglossian one: property rights don’t matter so long as someone has them and the parties are free to bargain with each other. In brief, Coase’s so-called theorem not only posits that most conflicts are reciprocal in nature (Miller v. Schoene being a textbook illustration of the reciprocal nature of harms); it also predicts that private bargaining will produce an efficient outcome regardless of where or to whom those property rights are initially assigned when two conditions are met: (1) when property rights are well-defined, and (2) transaction costs — i.e. the costs of negotiating, monitoring, and enforcing agreements — are low.

Buchanan, for his part, was fully aware of Coase’s theorem. In fact, he devotes most of his 1972 reply paper to the problem of transaction costs and to the possibility of a negotiated settlement between the red cedar owners and the apple growers, and his treatment of both of these issues is a sophisticated one (see especially pp. 441-448 of Buchanan’s reply paper). Spoiler alert: Buchanan’s disagreement with Samuels goes way beyond the technical details of the Coase theorem. Their disagreement was much deeper and philosophical than that, for as I will explain in my next post, what Buchanan and Samuels really disagreed about was the proper relationship between economics and law …